Investment in Indian Solar Sector Dips to $9.8 Billion in 2018

Downstream activity decreased YoY while upstream activity increased


In 2018, investments in the Indian solar sector totaled approximately $9.8 billion compared to 2017, in which almost $11.5 billion flowed into the Indian solar sector.  2018 witnessed a decline of 15% in investments year-over-year (YoY). These findings were revealed in Mercom India’s recently released 2018 Q4 and Annual India Solar Market Update.

Even though downstream investments fell YoY due to a decrease in solar installations and decline in system costs; the total investment reached almost $10 billion as the upstream activity increased due to investments in new manufacturing facilities.

2018 was a challenging year for the Indian solar market with GST rate issues, the imposition of safeguard duty on solar cells and modules from China and Malaysia, and the cancellation of more than 4 GW of auctions by government agencies citing high tariffs, leading to the first decline in installations since 2014.

The Indian solar market added 8.3 GW in new large-scale and rooftop installations in the calendar year 2018.

However, the imposition of safeguard duty also led to manufacturing capacity addition domestically.

Investments in Indian Solar Sector Dips to $9.8 Billion in 2018

Few Noteworthy Deals

In January 2018, ReNew Power raised ₹22.35 billion (~$352 million) to be used for its expansion and loan-payment plans. ReNew Power raised the amount through Non-Convertible Debentures (NCD) which were issued in two parts. The company raised ₹14.75 billion (~$232 million) through a multi-issuer cross-collateralized rupee bond. The remaining ₹7.6 billion (~$120 million) was raised through a credit enhanced NCD and has a tenor of 17 years.

In the same month, solar firm Orb Energy raised over $14 million (~₹954 million) in equity and debt to expand its in-house finance facility of rooftop solar projects for Small- and Medium-sized Enterprises (SMEs) in India. The Netherlands Development Finance Company (FMO) provided $4 million (~₹254 million) in equity funding, the Overseas Private Investment Corporation (OPIC) provided $10 million (~₹636 million) as long-term debt.

Mahindra Renewables, a wholly owned subsidiary of Mahindra Group, achieved financial closure for a 250 MW solar project in the Rewa District of Madhya Pradesh. YES Bank will provide financing in the form of to ₹7.5B ($115.5 million) in project debt, and other financial institutions will provide up to ₹2 billion ($30.8 million). In January 2018, the International Finance Corporation (IFC), a member of the World Bank Group, had announced it will provide $50 million (~₹3.2 billion) as senior or IFC-A loan to Mahindra Renewables. Back then, the IFC had also announced, “Apart from loaning the $50 million (~₹3.2 billion), the IFC will also assist in mobilization of the syndicated parallel loan of up to $100 million (~₹6.4 billion).”

Vector Green Energy completed the refinancing of two solar projects with 223 MW of combined capacity in Telangana. The refinancing was initially sought after the company acquired the projects from First Solar. IndusInd Bank and L&T Finance together sanctioned more than ₹10 billion (~$156 million) to Vector Green toward the acquisition of the First Solar portfolio.

In May 2018, Sunsure Energy, a solar turnkey solutions provider, raised zero-collateral based debt capital worth $2.2 million from TATA Cleantech Capital, L&T Finance, and cKers Finance to be used as working capital to construct solar photovoltaic (PV) projects up to 100 MW in FY 2019.

In June 2018, Indian renewable energy project developer Azure Power raised $135 million in debt financing from a consortium of development finance institutions. The line of credit was led by International Finance Corporation, a member of the World Bank Group and attracted the participation of leading institutions, including FMO – the Dutch development bank, Société de Promotion et de Participation pour la Coopération Economique (Proparco) – the French development finance institution, and Oesterreichische Entwicklungsbank AG (OeEB) – the development bank of Austria.

The same month, Fourth Partner Energy, a distributed energy management company, raised a $70 million investment from The Rise Fund, a global impact investment fund managed by TPG Growth.

In August 2018, Cygni Energy Private Limited, a solar DC and microgrid solutions provider, raised $6.4 million in funding through a combination of equity and debt funds. The equity funding was provided by Endiya Partners, a leading early-stage venture capital firm that invests in product start-ups. The debt funding was made possible by IndusInd Bank, a leading private bank in India.

In November 2018, Freyr Energy, a Hyderabad-based rooftop solar company, raised ₹270 million (~$3.81 million) through a mix of equity and debt investments. The round was led by C4D Partners, a Netherlands-based Impact Investment Fund.

Indian solar companies did not receive any significant venture capital or private equity investment in 2018.

Full list of Q4 2018 funding and M&A deals and investment details: 2018 Q4 and Annual India Solar Market Update